Transcript Document

Harnessing the Potential of Digital in
Financial Services
Stephen Phillips
September 23, 2013
This information is confidential and was prepared by Bain & Company solely for the use of our client; it is not to be relied on by any 3rd party without Bain's prior written consent
Harnessing the potential of Digital in Financial Services
Context and
perspective
Leading Digital
practice
This information is confidential and was prepared by Bain & Company solely for the use of our client; it is not to be relied on by any 3rd party without Bain's prior written consent
Organising
for success
STK
130916-Belgium Finance Conference v5
2
Consumers will be more connected with more devices
CONSUMERS ARE INCREASINGLY
CONNECTED…
…USING MORE AND MORE DEVICES
Car
?
Domotics
E-book/
tablets
TV
Netbooks
Mobile Internet device
DVD players
Gaming
console
Smartphones
/ PDAs
PCs
2000
This information is confidential and was prepared by Bain & Company solely for the use of our client; it is not to be relied on by any 3rd party without Bain's prior written consent
2005
STK
2010
2015
130916-Belgium Finance Conference v5
3
The shift “online” is pronounced, particularly time
spent using social media
ONLINE WILL CONTINUE TO TAKE
SHARE
TOTAL TIME SPENT ON SOCIAL MEDIA
HAS INCREASED DRAMATICALLY
This information is confidential and was prepared by Bain & Company solely for the use of our client; it is not to be relied on by any 3rd party without Bain's prior written consent
STK
130916-Belgium Finance Conference v5
4
Digitally active customers are more valuable
DISGUISED MASS AFFLUENT SEGMENT EXAMPLE
DIGITALLY ACTIVE
CUSTOMERS ARE
MORE SATISFIED
PROMOTERS GENERATE MORE
VALUE…
…AND REFER MORE
On-line and Mobile Use**
This information is confidential and was prepared by Bain & Company solely for the use of our client; it is not to be relied on by any 3rd party without Bain's prior written consent
STK
130916-Belgium Finance Conference v5
5
Digitalisation lowers distribution costs by 10-30% for
some customers… but not for high-frequency users UK EXAMPLE
HIGHLY DIGITAL CUSTOMERS HAVE
SIGNIFICANTLY HIGHER USAGE
RESULTING IN “U CURVE” EFFECT
This information is confidential and was prepared by Bain & Company solely for the use of our client; it is not to be relied on by any 3rd party without Bain's prior written consent
STK
130916-Belgium Finance Conference v5
6
Financial Services companies have much to think about in
relation to our increasingly digital world
SITUATION
• Fundamental
changes in
consumer
behaviour
• Unprecedented
regulatory
pressure
• Fast moving
technology trends
• Increasingly
competitive
landscape
COMPLICATIONS
QUESTIONS
• Legacy environments
are slow and expensive
to upgrade
• Where is current
business model under
most pressure?
• Not all technology &
consumer trends are of
equal importance
• Which are the digital
trends to really get
behind?
• Must not divert
attention from today’s
business and regulatory
commitments
• What is the scale of
implied effort?
• Reduce opex/capex vs.
increase digital
investment
• What are priorities if
cash constrained?
This information is confidential and was prepared by Bain & Company solely for the use of our client; it is not to be relied on by any 3rd party without Bain's prior written consent
STK
130916-Belgium Finance Conference v5
7
Harnessing the potential of Digital in Financial Services
Context and
perspective
Leading Digital
practice
This information is confidential and was prepared by Bain & Company solely for the use of our client; it is not to be relied on by any 3rd party without Bain's prior written consent
Organising
for success
STK
130916-Belgium Finance Conference v5
8
Most banking transactions are already ‘digital’
RETAIL BANKING
EXAMPLE
This information is confidential and was prepared by Bain & Company solely for the use of our client; it is not to be relied on by any 3rd party without Bain's prior written consent
STK
130916-Belgium Finance Conference v5
9
Example: Commonwealth Bank of Australia
TECHNOLOGY DELIVERY
CBA STRATEGIC FOCUS
1
People
Customer:
Technology Strength Productivity
Revitalised front-line customer interface
2
Best-in-class online platforms
More customer needs met in core
franchise “One CommBank”
Continued growth in business and
institutional banking
Disciplined growth outside of Australia
Strategic Advantage:
3
Core:
Core Banking Modernisation (CBM)
This information is confidential and was prepared by Bain & Company solely for the use of our client; it is not to be relied on by any 3rd party without Bain's prior written consent
STK
130916-Belgium Finance Conference v5
10
1
Advancements in technology improved face-to-face
interaction with customers
SELF-SERVICE
FLAGSHIP BRANCH LAYOUT
• Interactive/self-service options for
customers to undertake all transaction
banking requirements
- Customers become familiarised with
technology options (iPads and iPod apps)
thereby reducing the need for bank visits
- Self service options reduce demand on tellers
and waiting times
- FX and coin counting machines available
COMMSEE REAL-TIME
CUSTOMER SNAPSHOT
• Frontline customer interface used by
bank teller staff/agents
• Single view of customer
• Integrated with Core Banking to provide
real-time transaction details for all
personal accounts
• Branch acts as a ‘one-stop-shop’ with a
coffee shop, events and seminars for
customers
This information is confidential and was prepared by Bain & Company solely for the use of our client; it is not to be relied on by any 3rd party without Bain's prior written consent
STK
130916-Belgium Finance Conference v5
11
2
Bank’s technology allows for easier customer banking at
any time of the day
ONLINE
• NetBank (online
banking):
- Real-time account
information
- Tools accessible on-site
- Google Chrome integration
• CommSec (online
brokerage):
- Market leading platform
- Easy access to information
- Ability to trade
instruments
• FirstChoice and
Commbiz
- Portals for wealth and SME
clients
MOBILE
• CommBank app:
-
Real-time view of A/C
Trade stocks
FX calculator
Undertake bank
transfers and B-pay
• Kaching:
- Pay 3rd parties using
mobile number, email,
Facebook or bump
- Contactless payments
• Property Guide
app:
- Reality view
- Loan repayment calc.
SOCIAL
• Facebook:
POINT OF SALE
• Pi - Albert:
- 236k likes
- Competitions, new
products and offers
announced via Facebook
- Winner of Facebook’s
Studio Live Awards for
the smartest use of
Facebook
• YouTube:
- ~1.3m views
- ~1k subscribers
- Open platform POS
payment method
- Businesses can create
own compatible apps
- Secure merchant
terminal
- QR scan, card scan, chip,
NFC payments
- Customers can split bill
• Pi – Leo:
- Device plugged into
iPhone/iTouch turning it
into payment terminal
- Similar payment
functionality to Albert
• Twitter:
- ~9.5k followers
This information is confidential and was prepared by Bain & Company solely for the use of our client; it is not to be relied on by any 3rd party without Bain's prior written consent
STK
130916-Belgium Finance Conference v5
12
3
Core Banking Modernisation has focused on improving
processes to optimise front-end
Enhanced
customer
experience
• Real-time banking, 24x7
• Instant account opening
• Customised product offers
• Straight through processing
Greater efficiency
• Faster speed-to-market
• Lower cost-to-income
Improved risk
management
Industrialisation
Future proofing
• Greater system reliability
• Less manual re-work and errors
• “Bank of the Future”
• Greater flexibility
• Separate distribution/manufacturing
• Broader growth opportunities
This information is confidential and was prepared by Bain & Company solely for the use of our client; it is not to be relied on by any 3rd party without Bain's prior written consent
STK
130916-Belgium Finance Conference v5
13
IT investment has paid off in the form of more efficient
processes
5 YEARS AGO
TODAY
• 50% of spend on
infrastructure
• 26% of spend on
infrastructure
• 23 data centres
• 2 data centres
• 70 severity 1 incidents
• 7 severity 1 incidents1
• 1,200 changes into
production monthly
• 3,000 changes into
production monthly
• 74% customer-focused
content
This information is confidential and was prepared by Bain & Company solely for the use of our client; it is not to be relied on by any 3rd party without Bain's prior written consent
STK
130916-Belgium Finance Conference v5
14
Digitalisation strategy helped CBA become the market
leader
#1
Online banking
#1
Social &
Facebook
4.25m
active online
customers
#1
>40%
In the youth
segment
of all payment
transactions
460k
1st
#1
iTunes app
#1
Kaching
downloads
Real-time
banking
Contactless
acceptance
points
>2.0m
Main Financial
Institution for
#1
customers on
mobile
1 in 3
Australians
This information is confidential and was prepared by Bain & Company solely for the use of our client; it is not to be relied on by any 3rd party without Bain's prior written consent
Contactless
(7M PayPass
enabled cards)
STK
130916-Belgium Finance Conference v5
15
Harnessing the potential of Digital in Financial Services
Context and
perspective
Leading Digital
practice
This information is confidential and was prepared by Bain & Company solely for the use of our client; it is not to be relied on by any 3rd party without Bain's prior written consent
Organising
for success
STK
130916-Belgium Finance Conference v5
16
What does it take to launch impactful digitalisation
initiatives?
1
3
Scope & focus
2
Ambition
• Clear and unambiguous definitions
of what is to be considered ‘digital’
• Translation of digital potential into
business impact
• Solid understanding of likely
impacts of key marketplace and
technology trends
• Clarity on choices associated with
differing levels of digital ambition
and investment
• Prioritised sense of the most
important challenges and gaps
• Quantitative goals that will excite
and engage the business
Governance & capability
4
Investment principles
• Organisation model for digital
efforts that ‘goes with the grain’
• Know starting position on levels of
current digitally related spend
• Clarity on who is accountable for
what, and where the buck stops
• Debate carefully ‘new toys’ versus
driving adoption of existing
• Right competencies in right place
to ensure successful execution
• Create investment portfolio… from
reinforced basic service delivery all
way to latest mobile experiments
This information is confidential and was prepared by Bain & Company solely for the use of our client; it is not to be relied on by any 3rd party without Bain's prior written consent
STK
130916-Belgium Finance Conference v5
17
1
Organisations have many different definitions of digital
1
CUSTOMER/CHANNEL/PRODUCT RELATED DIGITAL INNOVATIONS
Customer portal
Social media
Advisor portal and tablet interface
New digital products (e.g. Telematics)
Lead generation/prospect management
Distributor management
This information is confidential and was prepared by Bain & Company solely for the use of our client; it is not to be relied on by any 3rd party without Bain's prior written consent
STK
130916-Belgium Finance Conference v5
18
1
Organisations have many different definitions of digital
2
INCLUDE BROADER SET OF APPLICATIONS?
1
CUSTOMER/CHANNEL/PRODUCT RELATED DIGITAL INNOVATIONS
Customer portal
Social media
Advisor portal and tablet interface
New digital products (e.g. Telematics)
Lead generation/prospect management
Distributor management
Policy systems
Enterprise
components
Data management
This information is confidential and was prepared by Bain & Company solely for the use of our client; it is not to be relied on by any 3rd party without Bain's prior written consent
Business support
solutions
STK
130916-Belgium Finance Conference v5
19
1
Organisations have many different definitions of digital
3
INCLUDE IT INFRASTRUCTURE AND ENABLING TOOLS?
Hosting
2
Network
Workplace
INCLUDE BROADER SET OF APPLICATIONS?
1
CUSTOMER/CHANNEL/PRODUCT RELATED DIGITAL INNOVATIONS
Customer portal
Social media
Advisor portal and tablet interface
New digital products (e.g. Telematics)
Lead generation/prospect management
Distributor management
Policy systems
System management
tools
Enterprise
components
IT development tools
Data management
Business support
solutions
Security and access
management
This information is confidential and was prepared by Bain & Company solely for the use of our client; it is not to be relied on by any 3rd party without Bain's prior written consent
Middleware
STK
130916-Belgium Finance Conference v5
20
Key to identify and align upon priority areas for digital
transformation
ILLUSTRATIVE
INSURANCE EXAMPLE
VERTICAL
PROPOSITIONS
DISTRIBUTION
& CUSTOMER
INTERFACE
1
ADVISED
Individual
GUIDED
Retirement
ONLINE PORTAL
Corporate
SME
SHARED SERVICES
CUSTOMER
Significant digital capability gaps
BUSINESS COLLABORATION
SHARED SERVICES
IT INFRASTRUCTURE & ORGANISATION
Digital needs will impact all existing plans
This information is confidential and was prepared by Bain & Company solely for the use of our client; it is not to be relied on by any 3rd party without Bain's prior written consent
Ratify existing plans
STK
130916-Belgium Finance Conference v5
21
2
Digitalisation can make a significant contribution to
companies’ ambitions
LIFE CO EXAMPLE
Digitalisation plays a fundamental role
Digitalisation plays a supporting role
Frontline
Backoffice
Enable
customer
self-service
Move
customer
contact to
lower cost
channels
Increase
product
cross-sales
Differentiate
through
online/
mobile
Eliminate
critical
system
incidents
Best
channelpartner
interface
Enable
growth
initiatives
Best
advisory
tools/apps
Decrease
infrastructure
maintenanc
e cost
Decrease
process and
re-work
cost
Stronger
customer
relationships
Most
effective
pricing/
underwriting
Increased
revenues
Lower
cost
This information is confidential and was prepared by Bain & Company solely for the use of our client; it is not to be relied on by any 3rd party without Bain's prior written consent
STK
130916-Belgium Finance Conference v5
22
2
Goals leading banks are establishing to move ‘self service’
to the next level are extremely bold
ILLUSTRATIVE
TRANSACTIONS WITH POTENTIAL
FOR SELF-SERVICE
STRIVE TO DECREASE
NON-SELF-SERVICE TRANSACTIONS
WHAT HAS BEEN DONE
WHAT CAN BE DONE IN 2013
Potential to
Online/mobile
self-serve
via:
CDM only
ATM/CDM
BEYOND
2013
New
functionalities
being delivered
Limited
potential to
self-serve
This information is confidential and was prepared by Bain & Company solely for the use of our client; it is not to be relied on by any 3rd party without Bain's prior written consent
STK
130916-Belgium Finance Conference v5
23
3
We see 5 approaches to managing digital initiatives
INSURANCE EXAMPLE
Level of central control
A
Inspiration from
Global,
Local organisations
deliver
B
C
Active facilitation
Central
of global best
innovation team
practice sharing
and seed capital
•Initiation, funding
and delivery
resides with
countries
/regions
•Global structure
and resources to
support int’l
alignment and best
practice sharing
•Full autonomy to
use own local
application
solutions
•Global plays a role
in establishing
test pilots
•Global formulates
global vision,
goals and global
idea exchanges
•Funding and
delivery resides
with local
•Full autonomy to
use own local
applications
D
Targeted
standardised/
shared
investment
E
Systematic,
global
standardisation
and roll-out
•Global funds and
manages a
portfolio of
innovation ideas
•Global actively
supports shared
investment
priorities
•Global strategy,
architecture and
compliance
policies
•Central
innovation
team(s) to
incubate ideas for
broader local
application, acts as
catalyst for
invention
•Select areas
governed by
global
architecture and
compliance
•One global
systems
platform
•Key systems
platforms
centrally owned
and managed
•Autonomy only for
select local app.
This information is confidential and was prepared by Bain & Company solely for the use of our client; it is not to be relied on by any 3rd party without Bain's prior written consent
STK
•Global
formulation and
funding of
initiatives
•Process
ownership roles
installed locally
130916-Belgium Finance Conference v5
24
4
One of hottest digital CEO debates we observe is
‘adoption of the old’ versus ‘investment in the new’
Self-service adoption targets
RETAIL BANKING
EXAMPLE
ADOPTION LEVERS
1
2
Promotion &
communication
• Online splash
screens
• Leaflets & signage
• Advertising
campaigns
Staff training &
customer
education
• Staff-led
discussions with
customers using inbranch technology
• Security and fraud
awareness campaigns
3
4
Incentives
Enforcement &
penalties
• Financial rewards
to switch to paperless
billing
• Higher service fees
for assisted
transactions
• Higher interest
rates on accounts
opened online
• Restrictions on lowvalue assisted cash
withdrawals
SUPPORTING CAPABILITIES
Technology and hardware
Technology
and hardware
• New ATM/CDM machines;
Functionality
across all channels
Management information
• Goals and quantifiable
metrics; and
Reporting
and data gathering
Technology
hardware
Branch design and format
Technology
andTellers
hardware
• ATM/CDM positioning
and signage;
location
This information is confidential and was prepared by Bain & Company solely for the use of our client; it is not to be relied on by any 3rd party without Bain's prior written consent
STK
130916-Belgium Finance Conference v5
25
4
Part of digitalisation budgets must improve IT service
quality basics to satisfy increasingly demanding clients
RETAIL INSURANCE
EXAMPLE
This information is confidential and was prepared by Bain & Company solely for the use of our client; it is not to be relied on by any 3rd party without Bain's prior written consent
STK
130916-Belgium Finance Conference v5
26
4
Bold CEOs are stepping-up to a ‘digital investment
bubble’ but holding divisional execs accountable for RoI
CASH
NUMBERS
Key
~XXM spend above
approved current plan in
Year 2, with additional XXM
IT Strategy recommended
spend
This information is confidential and was prepared by Bain & Company solely for the use of our client; it is not to be relied on by any 3rd party without Bain's prior written consent
BU1
BU1
BU1
BU2
BU2
BU2
Budget
to be approved
incremental
Budget
to be approved
incremental
Customer-facing; incremental
Shared incremental
IT incremental
STK
130916-Belgium Finance Conference v5
27
Where are the Digital Execution Challenges?
Scope & focus
• Clear
and unambiguous
definitions
•Are
you working
with clear and
ambiguous
of
what
is
to
be
considered
‘digital’
definition(s) of what digital means?
• Solid
•Are
SL’s understanding
digital efforts ‘go of
to likely
market’ and
distribution
focused
or do they extend
impacts of
key marketplace
and to
product
and policy
space?
technology
trends
•Are infrastructural prerequisites such as IT
• Prioritised sense of the most
architecture considered within scope?
important challenges and gaps
Governance & capability
Ambition
• Translation
digital
potential
into
•Is
there agreedof
linkage
from
SLs stated
business
impactthrough to the role that
business
ambitions
digital
capabilities
mustassociated
play?
• Clarity
on choices
with
•Todiffering
what extent
haveofthese
requirements
levels
digital
ambition
been
driven
down
into
concrete
KPIs?
and investment
•How have any conflicts between competing
• Quantitative goals that will excite
ambitions been resolved?
and engage the business
Investment principles
• Organisation
for digital
•What
are the rolemodel
and associated
decision
efforts
that
‘goes
with
the
grain’
accountabilities in different geographies?
• Know
position on levels
of
•Is
there astarting
clear point-of-departure
factbase
digitally
spend
oncurrent
current SL
digital related
expenditure?
• Clarity
on who
accountable
for
•To
what extent
are is
country
and product
groups
and engaged
withstops
digital
what,aligned
and where
the buck
efforts?
• Debate
carefully
‘new toys’
versus
•How
are Divisional
executives
being
held
accountable
RoI on their
share of the
driving adoption
of existing
transformation investment?
•What, if any, have been resourcing and
to ensure successful execution
capability related ‘pinch points’?
•Will further waves of investment be
reinforced basic service delivery all
required?
• Right competencies in right place
• Create investment portfolio… from
way to latest mobile experiments
This information is confidential and was prepared by Bain & Company solely for the use of our client; it is not to be relied on by any 3rd party without Bain's prior written consent
STK
130916-Belgium Finance Conference v5
28